KUALA LUMPUR: Sentiment towards the ringgit is finally turning around. The currency rose more than any other in emerging markets as Prime Minister Datuk Seri Najib Tun Razak was cleared in a corruption probe and oil traded 16% off its lowest in more than a decade.
The currency strengthened for a fourth day in the longest stretch of gains since September as Brent crude pared losses. The ringgit extended an advance beyond its 100-day moving average, a bullish signal for a currency thatâ€™s appreciated this month while most Asian counterparts weakened. With Najib now able to give his full attention to an economy hit by a slump in commodities, focus will be on todayâ€™s budget revisions for a clearer picture on the outlook.
â€œWith the political risk out of the way, sentiment has improved,â€ said Nizam Idris, head of foreign-exchange and fixed-income strategy at Macquarie Bank Ltd in Singapore. â€œOil is also a big factorâ€ and a rally in the benchmark stock index indicates investors think the budget â€œwonâ€™t be too negative.â€
The ringgit rose 1.3% to 4.2380 a US dollar as of 2:26 pm in Kuala Lumpur and reached the yearâ€™s high of 4.2375, according to prices from local banks compiled by Bloomberg. The currency has strengthened 1.3% versus the dollar in January, compared with a 2.7% loss in the Indian rupee and the South Korean wonâ€™s 2.5% decline.
The FTSE Bursa Malaysia KLCI climbed 0.3%, adding to the 1.6% advance in the past two days. While the ringgit fell 19% in its biggest annual loss since 1997 last year, analysts are forecasting a less protracted slide in 2016. The currency will weaken to 4.41 per dollar, according to the median estimate in a Bloomberg survey.
Malaysiaâ€™s Attorney-General said on Tuesday that there was no evidence of wrongdoing by Najib over a US$681mil â€œpersonal donationâ€ from the Saudi royal family. The money was transferred in early 2013 before the general election, Attorney-General Mohamed Apandi Ali told reporters, citing investigations by the anti-graft agency. Najib returned US$620mil in August that year that was not utilised, Apandi said.
The budget amendments would include measures to reduce operating expenditure and plans to privatise some projects, Secretary-General of Treasury Tan Sri Mohd Irwan Serigar Abdullah said on Jan 13. Najib seeks to trim the fiscal shortfall to 3.1% of gross domestic product this year from an estimated 3.2% in 2015. The slide in Brent to around US$31 a barrel has prompted a government rethink as this yearâ€™s spending and revenue plans assume a price of US$48.
The deficit goal would likely be revised slightly higher, said Khoon Goh, a senior currency strategist at Australia & New Zealand Banking Group Ltd in Singapore. A new growth estimate for 2016 might also be announced from the current 4% to 5%, he said.
â€œThe ringgitâ€™s near-term fortunes remain tied to oil price developments, and further strength is dependent on the ability of oil prices to rally,â€ said Goh. â€œDomestically, the focus is on the budget revisions.â€ â€“ Bloomberg